white - accepting the invisible hand; market-based approaches to social-economic problems (2010)

Perfect and imperfect duties can also be derived from the universalization procedures of the categorical imperative, but I regard this as overly formalistic and less intuitive as a moral

Series Editor:

Mark D White, Professor in the Department of Political Science,

Econom-ics, and Philosophy at the College of Staten Island/CUNY.

The Perspectives from Social Economics series incorporates an explicit ethical

component into contemporary economic discussion of important policy and

social issues, drawing on the approaches used by social economists around

the world It also allows social economists to develop their own frameworks

and paradigms by exploring the philosophy and methodology of social

eco-nomics in relation to orthodox and other heterodox approaches to

econom-ics By furthering these goals, this series will expose a wider readership to the

scholarship produced by social economists, and thereby promote the more

inclusive viewpoints, especially as they concern ethical analyses of economic

issues and methods.

Accepting the Invisible Hand: Market-Based Approaches to Social-Economic

Accepting the Invisible Hand

Market-Based Approaches to Social-Economic Problems

Copyright © Mark D White, 2010.

All rights reserved

First published in 2010 by PALGRAVE MACMILLAN®

in the United States—a division of St Martin’s Press LLC,

175 Fifth Avenue, New York, NY 10010.

Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS.

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ISBN: 978–0–230–10249–1 Library of Congress Cataloging-in-Publication Data Accepting the invisible hand : market-based approaches to social- economic problems / edited by Mark D White.

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First edition: November 2010

10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Dedicated to the memory of Daniel C Kramer (1934–2010),

an exemplary scholar, colleague, mentor, and friend.

Preface and Acknowledgments ix

Mark D White

1 Markets and Dignity: The Essential Link

Mark D White

John Meadowcroft

James D Gwartney and Joseph S Connors

4 Don’t Let the Best Be the Enemy of the Good:

Jennifer A Baker

Benjamin Blevins, Guadalupe Ramirez, and

Jonathan B Wight

6 Philanthropy and the Invisible Hand:

Robert F Garnett, Jr.

Deirdre Nansen McCloskey

8 Doing the Right Things: The Private Sector Response to

Hurricane Katrina as a Case Study in the Bourgeois Virtues 169

Mark D White

Markets are hard to appreciate.

—Gary Becker

In an interview in The Wall Street Journal in early 2010, Gary

Becker, professor at the University of Chicago, fellow at the Hoover

Institution, and Nobel laureate in economics, explained how people

tend to have distrust of markets, despite the tremendous increases in

standards of living enabled by them:

People tend to impute good motives to government And if you

assume that government officials are well meaning, then you also tend

to assume that government officials always act on behalf of the greater

good People understand that entrepreneurs and investors by contrast

just try to make money, not act on behalf of the greater good And

they have trouble seeing how this pursuit of profits can lift the general

standard of living The idea is too counterintuitive So we’re always up

against a kind of in-built suspicion of markets There’s always a

temp-tation to believe that markets succeed by looting the unfortunate 1

It is the purpose of this book to help show that markets indeed do

not succeed at the expense of others—that commerce is rarely a

zero-sum game—and that markets not only serve to increase wealth and

standards of living, but can also be effective means of helping alleviate

social problems, as well as enhancing human life in ways deeper and

more meaningful than material satisfaction (important though that

is, especially in developing countries)

The contributors to this book are drawn from a wide variety of

fields and specializations, and each provides a unique perspective on

the social benefits of the market All of the chapters in this book

focus on positive arguments for markets, eschewing well-known

criti-cisms of the efficiency, efficacy, or ethics of state intervention in the

economy Readers who are looking for those arguments can easily

find them elsewhere—possibly even written by some of the present

contributors—but the chapters in this book argue the case for

mar-kets, not the case against government

In my chapter, for instance, I argue that the most essential feature

of markets is not their capacity for wealth creation or efficiency, but

rather that they embody respect of the dignity of persons as described

by the philosopher Immanuel Kant I then apply this analysis to the

case of health care, arguing that rather than representing an

inap-propriate use of the market, the intimately personal choices that are

made in the realm of health care necessitate a market setting in which

they can be made by patients themselves Along similar lines, John

Meadowcroft argues that market-based solutions to social problems

are preferable to political ones because they are more responsive to

the diversity of individual preferences, and he uses the examples of

smoking regulations and education to illustrate his point

James Gwartney and Joseph Connors provide theoretical

argu-ments and evidence, based on World Bank poverty rates and the

Economic Freedom of the World index, that economic freedom,

including a strong reliance of markets, not only increases wealth in

countries around the globe but also lowers their poverty rates,

coun-tering the frequent charge that the spread of free markets benefits the

wealthy at the expense of the poor Jennifer Baker provides a

philo-sophical complement to Gwartney and Connors’ chapter,

suggest-ing that Stoic ethics, with its bilevel account of value, can recognize

the good that the market does in generating widespread affluence,

while at the same time calling attention to its possible faults in terms

of issues such as unequal distribution and access She argues that

the Stoic account can also help us ethically consolidate our

market-oriented behavior (which usually makes up much of our day-to-day

lives) with our moral responsibilities and duties to others Citing the

economic and moral insights of Adam Smith (who was influenced by

Stoic thought), Benjamin Blevins, Guadalupe Ramirez, and Jonathan

B Wight examine the ethics surrounding market behavior in Mayan

culture, arguing that without understanding the history and culture

of different regions of the world, the impact of aid from abroad will

be radically diminished, if not self-defeating They also describe the

Highland Support Project, which has provided much- needed

assis-tance to the Mayan areas in Guatemala by respecting and building on

existing cultural practices to help enhance markets on the Mayans’

terms, not according to standard Western conceptions

Robert Garnett brings the thought of Friedrich von Hayek and

Kenneth Boulding together with that of Adam Smith to explain why

charity and commerce have been separated for so long in economic

discussion, and why they must be brought together to grasp the full

scale and scope of meaningful economic activity Deirdre McCloskey,

one of the most prominent exponents of Adam Smith’s moral

phi-losophy and the virtues of commerce, explains in her unique way that

market activity is not only honorable and virtuous work, but is often

also affirming and satisfying—if you do it right And finally, in the

spirit of McCloskey’s book The Bourgeois Virtues, Steven Horwitz

provides real-world examples of private firms acting charitably toward

both their communities and their employees, focusing on the efforts

of firms such as Wal-Mart during the tragic events and aftermath of

Hurricane Katrina Cynics may argue that these companies engaged

in charitable works simply for the publicity, but Horwitz effectively

answers this charge, providing ample evidence from numerous

inter-views and other sources to support his argument

Together, I feel the chapters in this book make a strong case for

the use of markets to enhance the material and ethical aspects of

society: helping deal with problems such as poverty and natural

disas-ters, contributing to the provision of services such as health care and

education, and enhancing standards of living and inner fulfillment

Following Becker’s lament, I hope that this book will make markets a

bit easier to appreciate (and perhaps a bit harder to denigrate)

My debts regarding this book are few in number but inestimable in

size First and foremost, I thank Laurie Harting at Palgrave Macmillan

for helping me launch the Perspectives from Social Economics series and

suggesting that I edit the first book myself Thanks go also to Laura

Lancaster at Palgrave, editorial assistant extraordinaire, who made my

job so much easier Finally, I thank each and every one of my

con-tributors, who made my job so very enjoyable and gratifying, and to

whom I attribute any success and acclaim this book may garner

Note

1 Peter Robinson, “ ‘Basically an Optimist’—Still: The Weekend

Inter-view with Gary Becker.” The Wall Street Journal, March 27–28,

Jennifer A Baker received a BA (philosophy and political theory)

from Brown University in 1995 and a PhD (philosophy) from the

University of Arizona in 2003 She is an assistant professor at the

College of Charleston and has also taught at Duke and UNC-Chapel

Hill Her research is focused on the usefulness of the traditional

accounts of virtue ethics for solving impasses in psychology, ethics,

political, and economic theory

Benjamin Blevins is the founder and executive director of the

Highland Support Project (HSP) of Guatemala HSP is a 501(c)(3)

organization based in Richmond, Virginia, which serves the Mayan

communities of Guatemala through transformational development

projects It also offers service-learning trips to North Americans in

its mission to foster meaningful exchange and understanding across

the Americas Ben is a graduate of the University of Richmond, where

he has been a frequent lecturer; his current work focuses on

devel-oping agency in marginalized communities through empowerment

programs and market access

Joseph S Connors is a doctoral candidate and BB&T dissertation

fellow at Florida State University His dissertation research is on the

role of institutions in helping to reduce poverty in developing

coun-tries His areas of specialization are development economics, applied

econometrics, and financial and monetary economics Before

begin-ning his graduate studies, he worked for nine years as an electrical

engineer in the San Francisco Bay Area

Robert F Garnett, Jr is Associate Professor of Economics at Texas

Christian University, United States His current work focuses on the

virtues of pluralism in economic inquiry and economics education,

and the philanthropic dimensions of commercial societies He is the

editor (with Erik Olsen and Martha Starr) of Economic Pluralism

James D Gwartney holds the Gus A Stavros Eminent Scholar

Chair at Florida State University, where he directs the Stavros

Center for the Advancement of Free Enterprise and Economic

Education He is the coauthor of Economics: Private and Public

Choice (Cengage South-Western Press, 2010), a widely used

prin-ciples of economics text that is now in its thirteenth edition He

is also the coauthor of the annual report, Economic Freedom of the

World, which provides information on the consistency of

institu-tions and policies with economic freedom for 141 countries His

publications have appeared in scholarly journals, including the

American Economic Review, Journal of Political Economy, Southern

Economic Journal, and Journal of Institutional and Theoretical

Economics During 1999–2000, he served as chief economist of the

Joint Economic Committee of the U.S Congress He is a past

pres-ident of the Southern Economic Association and the Association

of Private Enterprise Education His PhD in economics is from the

University of Washington

Steven Horwitz is Charles A Dana Professor of Economics at

St Lawrence University in Canton, New York He is the author of

two books, Microfoundations and Macroeconomics: An Austrian

Perspective (Routledge, 2000) and Monetary Evolution, Free Banking,

and Economic Order (Westview, 1992), and has written extensively

on Austrian economics, Hayekian political economy, monetary

the-ory and histthe-ory, and the economics and social thethe-ory of gender and

the family His work has been published in professional journals such

as History of Political Economy, Southern Economic Journal, and The

Cambridge Journal of Economics He has also published public policy

on the private response to Hurricane Katrina for the Mercatus Center,

where he is an Affiliated Senior Scholar

Deirdre Nansen McCloskey teaches economics, history, English

lit-erature, and communications at the University of Illinois at Chicago

An internationally known economic historian and rhetorician of

sci-ence, she has written fifteen books and several hundred articles on

topics ranging from mathematical models of medieval agriculture

to the poetics and economics of magical beliefs Her recent books

include Bourgeois Virtues: Ethics for an Age of Commerce (2006), The

Cult of Statistical Signif icance: How the Standard Error Costs Jobs,

Justice, and Lives (with Stephen Ziliak, 2008), and Bourgeois Dignity:

Why Economics Can’t Explain the Modern World (2010) Educated at

Harvard, she taught for twelve years at the University of Chicago in

its best years of scientific creativity, and then for nineteen years at the

University of Iowa

John Meadowcroft is Lecturer in Public Policy at King’s College

London He is the author of The Ethics of the Market (Palgrave,

2005), which won an Intercollegiate Studies Institute Templeton

Enterprise Award, coauthor with Mark Pennington of Rescuing

Social Capital from Social Democracy (Institute of Economic Affairs,

2007), which won the Arthur Seldon CBE Award for Excellence, and

editor of Prohibitions (Institute of Economic Affairs, 2008) Since

2004 he has been a deputy editor and book review editor of the

jour-nal EconomicAffairs He is also series editor of the twenty-volume

Major Conservative and Libertarian Thinkers series published by

Continuum in 2009 and 2010

Guadalupe Ramirez is the founder of the Highland Women’s

Association (AMA), and owner and manager of AlterNatives, a fair

trade marketing enterprise Her current work focuses on providing

indigenous people access to skills and resources needed to succeed

in exporting to global markets AMA is a nonprofit organization

based in Quetzaltenango, Guatemala, and serves the Mayan

commu-nities of Guatemala through transformational development projects

Guadalupe is a frequent lecturer on women’s issues in development

and Mayan cosmo-vision

Mark D White is Professor in the Department of Political Science,

Economics, and Philosophy at the College of Staten Island/CUNY,

where he teaches courses in economics, philosophy, and law He writes

and blogs regularly on these topics, and is the author of Kantian

Ethics and Economics: Autonomy, Dignity and Character (Stanford,

2011) and editor of The Thief of Time: Philosophical Essays on

Procrastination (with Chrisoula Andreou; Oxford, 2010), Theoretical

Foundations of Law and Economics (Cambridge, 2009), and Ethics

and Economics: New Perspectives (with Irene van Staveren; Routledge,

2009), among others He is the series editor of “Perspectives from

Social Economics” from Palgrave Macmillan, of which this book is

the inaugural volume

Jonathan B Wight is Professor of Economics and International

Studies in the Robins School of Business at the University of

Richmond Recent research focuses on the intersection of economics

and ethics His academic novel Saving Adam Smith: A Tale of Wealth,

Transformation, and Virtue (2002) explores the moral foundations

of capitalism through the eyes of Adam Smith In 2007 he published

Teaching the Ethical Foundations of Economics (with John Morton), a

set of ten lessons on ethics for economics classrooms Recent research

focuses on Adam Smith’s understanding of instincts as a foundation

for survival and group success Jonathan is helping to launch a major

in Philosophy, Politics, Economics, and Law at the University of

Markets and Dignity: The Essential Link

(With an Application to Health Care)

Mark D White

As most economists will tell you, markets, under ideal conditions

of perfect competition, maximize the allocative and productive

effi-ciency of the economy Those ideal conditions are familiar to

intro-ductory economics students, and include large numbers of buyers and

sellers, perfect information about the prices and terms sellers offer,

homogeneous products, and no barriers to entry (or exit) If any of

these conditions do not hold, then efficiency is compromised, and

government intervention (such as price regulation and antitrust

mea-sures) is often recommended in order to bring the outcomes of the

imperfect competition closer to the ideal of perfect competition

The efficacy and ethics of government intervention in the

econ-omy has been thoroughly discussed and criticized elsewhere; in this

chapter, my plan is to focus on the view of the market that leads to

calls for intervention in the first place The standard economic view of

markets treats them as mechanisms for generating efficiency, and to

the extent that they fail at this purpose, their exclusive use in

allocat-ing resources is no longer justified Rather, I argue that the purpose

of markets is much broader than most economists maintain, and that

this purpose is embodied in markets themselves, so by definition they

cannot fail at it unless the government intervenes and disrupts the

operation of the market

Put another way, I argue that the market does not have a purpose

external to its nature, and it is not an instrument for achieving some

other goal or end such as efficiency or wealth Instead, the market

is constitutive of an end, or an essential part of it And that end is

dignity—or, to be more precise, ensuring respect for the dignity of

persons by allowing them the maximal freedom to pursue their own

ends, consistent with the equivalent freedom of all other persons to

do the same Some readers will no doubt recognize the influence of

Immanuel Kant’s moral and political theory here; indeed I will begin

this chapter with a brief summary of the relevant parts of Kant’s

thought, before I explain its implications for the role of the market

within it I will finish with an application of this approach to the topic

of health care, and explain why the need to respect dignity makes

markets more essential in the area of health care than perhaps any

other part of the economy

Kant on Autonomy and Dignity

As a moral philosopher, Kant is best known for his emphasis on duty

and its derivation from the categorical imperative, his version of the

moral law.1 But these are just the formal details of an ethical theory

that is ultimately based on dignity, which each and every person

pos-sesses by virtue of her rationality Specifically, Kant maintained that

rational persons have the ability to set laws to themselves and then

follow them, to the exclusion of any unendorsed influence from either

external forces (such as authority or social pressure) or internal forces

(such as desires and inclinations) Kant called this capacity autonomy,

and his usage of the term bears some similarity with more common

political and psychological senses of the term that mean self-rule.2

But while most such understandings of autonomy emphasize

inde-pendence of choice from external coercion (such as in the sense of

national sovereignty), Kant’s sense of autonomy also implies

self-mas-tery: a person can reflect upon and either endorse or overcome her

desires and preferences This does not imply, of course, that desires

and preferences are presumed to be bad or immoral, but rather that

they should never be acted upon without adequate reflection and

endorsement in light of the moral law In other words, one should

always decide whether to indulge desires, as opposed to automatically

or habitually doing so There is no issue with trivial decisions (as Kant

acknowledged3), but in any morally loaded choice situation, the pull

of inclination must be checked by the requirements of duty, which

themselves are motivated by the recognition of the autonomy of all

rational persons (including the actor herself)

From this capacity for autonomous choice, Kant derives the dignity

of all rational persons, an “unconditional and incomparable worth.”4

He contrasted persons and “things”: things have a price and can be

exchanged for one another, while persons possess a dignity above

price He wrote, “whatever has a price can be replaced by something

else as its equivalent whatever is above all price, and therefore

admits of no equivalent, has a dignity.”5 The value of things is

con-tingent on their usefulness, but persons possess an intrinsic worth,

by virtue of which they are to be treated as “ends-in-themselves,” not

to be used simply as means, but always at the same time as ends (to

paraphrase one of the formulae of the categorical imperative).6 In one

of his most eloquent and inspiring passages, Kant summarizes the

source and meaning of dignity, while asserting the equal respect that

dignity demands from all persons for all persons:

a human being regarded as a person, that is, as the subject of a morally

practical reason, is exalted above any price; for as a person he is not to

valued as merely a means to the ends of others or even to his own ends,

but as an end in himself, that is, he possesses a dignity (an absolute

inner worth) by which he exacts respect for himself from all other

ratio-nal beings in the world He can measure himself with every other being

of this kind and value himself on a footing of equality with them 7

This respect for persons is reflected in the duties that Kant derives

from the categorical imperative, which are usually broken into two

types, perfect and imperfect Perfect duties, which are usually

nega-tive duties prohibiting certain actions such as theft, murder, or deceit,

come from not treating others merely as means to our own ends

Imperfect duties, on the other hand, are normally positive duties that

come from the emphasis on treating persons always as ends, and are

more open-ended in their requirements, impelling us to adopt certain

attitudes (like beneficence) that will result in appropriate actions when

possible Perfect duties are sometimes referred to as strict, because

they admit little latitude in their execution, while imperfect duties

are often called wide, because they allow significant latitude in their

performance, both in the interests of other duties as well as in the

satisfaction of the agent’s own interests.8

At bottom, the entire superstructure of duties and the categorical

imperative is built on the foundation of autonomy and dignity Perfect

and imperfect duties can also be derived from the universalization

procedures of the categorical imperative, but I regard this as overly

formalistic and less intuitive as a moral explanation.9 Framing these

duties in terms of respect for dignity, the humanistic nature of Kant’s

moral theory is revealed, along with the potential that lies within

every person to realize her own ends and be the person she wants to

be, while at the same time requiring that that person respect the fact

that every other person is endowed with the same capacities This is

also where reciprocity enters into Kant’s system in a very significant

way: since everyone possesses autonomy and therefore an intrinsic

dignity, each of us has a responsibility to acknowledge the dignity of

every other person and, when possible, take their well-being into

con-sideration as well This reciprocity is best illustrated in Kant’s ideal

“kingdom of ends,” a utopian state of the world in which all persons

can pursue their own ends, consistent with all others doing the same,

by following the moral law, including both the perfect and imperfect

duties derived from it.10

Autonomy can be interpreted positively as a capacity, but also

nor-matively as a required goal: Each human being has the responsibility

to achieve her potential, implied by her autonomy and general duties

of self-respect One of Kant’s imperfect duties to oneself is to develop

one’s talents, but the point is much broader than that As

philoso-pher Thomas Hill puts it, Kant maintained “that all have autonomy,

that this implies commitment to certain rational constraints, and that

some live up to these commitments while others do not.”11 But to

realize our potential as implied and required by our autonomy,

natu-rally we need to interact with other people, not just socially, but

sim-ply to acquire the goods and services we need to conduct our lives and

achieve our goals

It is through the market that we achieve this second purpose of

sociality, and in a way that not only allows us to fulfill our goals but

also respects the dignity of the other participants in the market, by

not using them simply as a means but always at the same time treating

them as ends This is done, not necessarily by direct acts of

benef-icence, but by simply allowing other persons to achieve their own

goals, in their own ways, at the same time, recalling Adam Smith’s

famous statement that “it is not from the benevolence of the butcher,

the brewer, or the baker, that we expect our dinner, but from their

regard to their own interest.”12 Of course, the same goes for these

merchants’ customers, who also seek their own self-interest (and that

of their families, as with the merchants), but in a way that allows

mutual satisfaction and improvement, in an environment of respect.13

In that way, the market is part and parcel of all persons realizing their

autonomy and respecting each other’s dignity

Markets, Choice, and Respect

Individuals

We express our autonomy in the real world through choice, by offering

(or accepting an offer) to exchange something we own for something

we want more For example, every morning I exchange some of my

“wealth” (such that it is) for coffee, and the coffee vendor exchanges

his hearty brew (such that it is!) for my money Each of us is making

use of our resources to acquire something of more value, understood

in individually subjective terms Of course, we are also using each

other for our own ends; I am using him to satisfy my java craving, and

he is using me to help support his livelihood However, the important

thing is that we are not merely using each other as means to our ends,

but we are also treating each other as ends-in-ourselves This can be

understood in a very minimalist way—I do not give him counterfeit

money or flee with my coffee without paying, and he does not take

my money and run or give me three-week-old rancid swill Even

bet-ter, we are not rude to each other, and may even exchange pleasantries

or offer to help with some spilled coffee or dropped money

However, even absent this positive interaction, we are engaging in

honest, open commerce that serves both of our interests—whatever

they may be—and doing so together Without the coffee vendor, I

would suffer headaches (and my colleagues would suffer me); without

my money, the coffee vendor would be marginally less successful in

his trade Through the market we not only acquire the goods and

services we need and want, but we do so in an atmosphere of respect,

free of coercion and deceit, while indirectly promoting the end of all

persons through entering into mutually beneficial transactions In

other words, the market allows for the maximum freedom of choice

consistent with all doing the same (similar to Kant’s kingdom of ends,

but in a more limited way—more on this later)

In what ways can this picture go wrong; how can persons fail to

respect the dignity of others? The two main ways is which this can

happen, which we mentioned earlier, are coercion and deceit, both of

which use persons merely as means without at the same time treating

them as ends One way this requirement can be formulated is that to

treat someone as an end, that person has to be able to assent to your

end As Kant wrote:

[T]he man whom I want to use for my own purposes by such a

prom-ise cannot possibly concur with my way of acting toward him and hence

cannot himself hold the end of this action This becomes even clearer

when instances of attacks on the freedom and property of others are

considered For then it becomes clear that a transgressor of the rights

of men intends to make use of the persons of others merely as a means,

without taking into consideration that, as rational beings, they should

always be esteemed at the same time as ends, i.e., be esteemed only

as beings who must themselves be able to hold the very same action as an

end.14

That person does not necessarily have to agree with, or endorse, the

other person’s end, but she has to have a chance to agree or disagree

with it She does not have this chance if the other person’s end is

hid-den (in cases of deceit) or the chance to assent was hid-denied altogether

(in cases of coercion) For example, if my goal is to get free coffee

from my vendor, and I plan to do it by either stealing the coffee

forc-ibly or paying in counterfeit money, the vendor cannot possforc-ibly agree

or disagree with my end, because either he is not aware of it (in the

case in which I deceive him with false bills) or I never gave him a

chance (in the case in which I steal the coffee outright) If he knew

of my end, of course, he would not agree with it—I can certainly ask

him for free coffee, to which he would probably reply “no”—but I

would fail to respect his dignity if I bypassed requesting his consent

entirely and instead simply lied or stole from him

In a world of perfectly moral persons, or in cases of transactions

between friends (or at least familiar strangers) , coercion and deceit

would not be problematic, for most everyone would treat each other

with respect based on duty, courtesy, or care But many if not most

mar-ket transactions are between fairly anonymous strangers who may feel

no particular affinity for each other (or even downright hostility, such

in areas rife with racial or ethnic tensions) Also, we cannot assume all

persons are paragons of virtue, normal fallible human beings that all of

us are (your author perhaps more than most!) For these cases, we need

laws to protect against coercion and fraud; in most modern societies,

coercion is a crime, and fraud is a tort (private wrong) Of course, such

legal protection is only as good as the enforcement measures behind

it, but one can hope that not all market participants need the threat of

legal sanction to avoid theft and dishonest dealings.15 Nonetheless, as

most market advocates recognize, to be effective in any sense, markets

must operate within a system of justice that protects essential rights of

property and person.16 Given these legal protections against fraud and

deceit (to the extent they are necessary), however, the market serves to

promote mutually voluntary transactions that serve all parties’ interests

simultaneously—and respectfully

Institutions

Coercion and deceit are not problems only with individual actors;

they can also be features of economic institutions and systems as a

whole Any system of economic organization that is not based on

free, voluntary exchange involves some degree of coercion (besides

state coercion designed to prevent private coercion, as endorsed by

Kant).17 Of course, compromises must be made, such as in the case

of taxation; even a state of minimal scale and scope must be funded

somehow Governments pass laws that limit sales of certain goods and

services and regulate qualities of others, laws that trade off respect for

individual dignity and choice for the sake of the public good (such

as safety), a familiar controversy Here, I will focus on a more direct

offense to dignity: the manipulation of a person’s own choices

regard-ing how she chooses to spend her resources and interact in the

mar-ket, not for the public benefit but for “her own good.”

The most pernicious example of this manipulation is what is

some-times referred to as “libertarian paternalism,” as detailed by legal

scholar Cass Sunstein and economist Richard Thaler in their

popu-lar book Nudge and numerous articles in law reviews and economics

journals.18 Based on behavioral economics research that purports to

show systematic biases and cognitive dysfunctions in human

decision-making,19 Sunstein and Thaler conclude not only that persons make

choices that are not in their true interests, but that regulators and

policymakers know these true interests and in those interests should

“nudge” persons into making better choices toward them: “We argue

for self-conscious efforts, by private and public institutions, to steer

people’s choices in directions that will improve the choosers’ own

welfare.”20 These nudges include apparently benign choice

manipula-tions as restructuring opmanipula-tions and choosing default opmanipula-tions, designed

with persons’ faulty decision-making capacities in mind to help them

make the “right” choices For example, they recommend that new

employees be automatically enrolled in 401(k) programs with the

option to withdraw, rather than not be automatically enrolled but

with the option to do so, since most persons are too lazy to actively

choose a nondefault option.21

Despite its subtlety—and, in another way, because of it—such

manipulation is offensive to dignity and autonomy, for several

rea-sons One, it treats the persons who are manipulated as less than

full persons As with any paternalistic regulation, it treats the

ratio-nal person as a child, unable to make decisions in her best interests

without the help of the regulator It is one thing to tax tobacco or

alcohol; to be sure, these are paternalistic regulations (although they

have other justifications also), but at least they are explicit and overt

But libertarian paternalism is inherently deceptive; it is intended to

be too subtle to detect, and to play on our cognitive dysfunctions to

achieve the goal of the regulation As Edward Glaeser notes,

“per-suasion lies at the heart of much of soft [libertarian] paternalism, and

it is not obvious that we want governments to become more adept

at persuading voters or for governments to invest in infrastructure

that will support persuasion.”22 In this way, it treats rational agents

like broken machines, which by implication are unaware of their own

interests and actions, and must simply be “adjusted” to reach the

desired end

This leads us to the other way in which such regulation fails to

respect the dignity of persons: that it presumes to know persons’

“true interests.” In the 401(k) case, the designers of the default choice

presume to “know” that the employees’ true interests lie in saving for

retirement; as Sunstein and Thaler write,

if employers think (correctly, we believe) that most employees would

prefer to join the 401(k) plan if they took the time to think about

it then by choosing automatic enrollment, they are acting

paternal-istically by our definition of the term steer[ing] employees’ choices

in directions that will, in the view of employers, promote employees’

welfare 23

Never mind that the employee may have a multitude of reasons to

put off saving for retirement, such as saving for a down payment on

a house, sending money home to her parents, or indulging a costly

gambling habit (her alternative use for the funds needs not be noble,

of course) True, she may be too lazy to enroll in a 401(k) when she

really wants to, and she may just as well be too lazy to choose not to

enroll when she has a very good reason not to enroll But regulators

do not consider this, having decided for themselves what is in

per-sons’ real interests and manipulating the choice situation to get them

to make the “right” choices It is pure hubris for the choice

manipu-lator to assume that he or she “knows” what an agent’s true interest

is, and then using that assumption to “guide” her to it and resigning

in smug satisfaction when suddenly, thanks to the policymaker, she

achieves her “true goal” by making the choice she was manipulated

into making.24

Real human beings have innumerable interests, including base

desires and enlightened tastes for material goods and wealth, health,

personal fulfillment, the well-being of family and friends, societal

justice (of all kinds), and more This plurality of desires, goals, and

concerns is further augmented by recognizing that one of the core

interests of persons is in choice or autonomy itself, and a person will

not necessarily trade it off for other goods of value to her As legal

philosopher Jules Coleman writes,

any plausible theory of what is valuable to a person would include the

ability to act on the basis of one’s preferences and desires But that is

because autonomous action is valuable to persons understood as

plan-ning agents who bear a special relationship of ownership and

respon-sibility to how their life goes, and not because people have a taste for

autonomy 25

Also, philosopher Christine Korsgaard argues that through our

choices and actions we constitute our own identities or form our

selves—but these choices must be autonomous, which means they

must be ours and ours alone.26 In other words, choice is valuable

above and beyond the value of what is chosen, and markets promote

that value, rooted in human dignity, by allowing voluntary

transac-tions with no coercion (other than what is necessary as a matter of

justice) or deception

Furthermore, out of respect for the dignity and autonomy of

per-sons, these voluntary transactions must be assumed to be mutually

beneficial Of course, there is no guarantee that all transactions will

be mutually beneficial; as behavioral economists continually tell us,

people admit that they make bad decisions all the time And this is

certainly true—but no one can know that a decision is bad except

the decision-maker herself, because no one knows her true interests

but her For example, Colin Camerer and his colleagues acknowledge

the possibility that people can make decisions against their

wealth-based interests, using the example of buying extended warranties,

a purchase generally regarded as irrational: “if informed consumers

continue to purchase the warranties, then it is quite possible that they

have good reason to do so, however unfathomable that decision may

seem to an economist.”27 If we observe someone making what we

consider to be a poor choice, we can certainly ask her why she is

mak-ing that choice, attempt to convince her otherwise, and disapprove of

it if we wish But if she ends up making that choice, we have to assume

she had a reason to make that choice, and that reason represented her

interests To assume otherwise—or worse, to act coercively on that

assumption—would be to fail to respect her dignity and autonomy,

and to treat her as less than a full person If the person realizes that

she is making poor decisions, or suffers from a lack of self-control, or

some other cognitive or rational difficulty, she is free to seek help,

and others are free to offer it But that choice is hers; no one else has

the right to impose such help on her, however “unfathomable” her

choice may seem

Markets and Dignity

By relying on and ensuring voluntary transactions that are assumed

to be in both parties’ subjective interests, the free market embodies

respect for the dignity of persons In fact, we can go further and say

that it is the institutional representation of this ideal Of course, the

market often achieves a level of wealth higher than other forms of

economic organization, and under “perfect conditions” it achieves

allocative and productive efficiency And sometimes it does not—

after all, these outcomes are contingent on market conditions and

circumstances—but none of these consequences, however perfect in

its own right, is essential to the market itself Insofar as the market is

comprised of individual choices, freely made in the absence of coercion

and deceit as enforced by the background laws of justice, it embodies

respect of dignity in an essential, integral way Furthermore, the

mar-ket coordinates individual choice in a way that respects the dignity of

all participants, allowing each to express her autonomy and pursue

her goals and ends consistent with all others doing the same Any

effi-ciency or wealth benefits produced by the market are secondary, and

any failure to achieve these secondary ends should not be regarded as

“market failure”—the only failure of the market would be a failure to

respect the dignity of its participants, which is impossible by

defini-tion, since it simply is the totality of individual choices Only

interfer-ence with the operation of the market can impair respect for dignity

by limiting the extent to which each person can express her autonomy

and choice consistent with all other doing the same

This interpretation is similar to Jules Coleman’s views on tort law

and corrective justice:

the relationship between tort law and corrective justice is not

instru-mental in any interesting sense; corrective justice itself may be a goal

of the practice, but it is not a goal external to it and at which the

prac-tices of tort law are aimed Rather, Anglo-American tort law expresses,

embodies, or articulates corrective justice Tort law is an institutional

realization of principle, not an instrument in the pursuit of an external

and hidden goal 28

Just as Coleman argues that efficiency cannot explain or justify

tort law, which “embodies” corrective justice, it does not explain or

justify the market, which embodies respect for dignity If the market

is good, just, or ethical, it is not because of the consequences it

pro-duces, which would make any such judgment contingent; rather, it is

intrinsically moral to the extent that the dignity of persons is

consid-ered moral And in a Kantian system, dignity derives from autonomy,

the capacity for which every person has by virtue of being a rational

being, and is therefore noncontingent or categorical

We must be careful not to take this point too far In particular,

I am not saying that the market represents a model for society in a

broader sense—far from it The market is not an appropriate model

for interactions among friends or family, or within many types of

organizations; it is certainly not a model for social interactions, nor

institutions in which rights are allocated according to a particular

sort of justice (such as corrective justice in Coleman’s analysis of

tort law, or retributive justice in the criminal justice system) But in

regard to the coordination of the pursuit of relatively anonymous

individuals’ interests, in which everyone has a right to dispose of

their own property in the way they choose, including offering it in

exchange for the property or services of another willing party, the

market is the only mechanism or process that respects the dignity of

those individuals

To look at this another way, recall the distinction Kant makes

between perfect and imperfect duties Perfect duties are mostly

nega-tive duties that provide for a minimal standard of morality: do not

kill, do not steal, do not lie, and so forth Imperfect duties

sup-plement perfect duties with positive action (when feasible) , chiefly

in providing aid to others (the duty of beneficence) The market is

chiefly based on perfect duty (enforced by the state when possible):

participants make, accept, and reject offers of trade in a setting of

mutual respect, without deception or coercion But outside relatively

anonymous market transactions, we want more—and society needs

more—than a minimal standard of ethics Among friends and

fam-ily, as well as in tight-knit communities, we need beneficence and

care; these may be nice in a pure market setting (if not taken too

far—see later), but are essential outside of it, in the grander view of

society

What is necessary for this “grander view of society” is exactly the

point of Kant’s “kingdom of ends,” mentioned earlier Two of the

steps to the kingdom of ends are civil society, characterized by

peo-ple following perfect duties under threat of punishment, and ethical

society, in which people not only follow both perfect and imperfect

duties, but they do so out of respect for the moral law itself (the

Kantian ideal for ethical behavior).29 The market corresponds to the

first step, which should not taken to imply that it is flawed or needs

to be improved, but simply that it is a template only for anonymous

market transactions, not for societal interactions in general, which

must adhere to the ideals of the ethical community.30 But within that

grander, more positively ethical society-at-large, pockets of market

activity can exist in which relatively anonymous persons can transact

with each other in an environment of mutual respect with no need for

overt acts of beneficence

In fact, such acts may be regarded as inappropriate, since we often

do not know most of the persons with whom we interact in the

mar-ket well enough to ascertain what type of aid they need (other than

obvious cases such as helping someone stand up after a fall) And if

we did offer extraordinary aid to such persons, there is the danger of

seeming presumptive or paternalistic in our giving; as Kant wrote, “I

cannot do good to anyone in accordance with my concepts of

hap-piness (except to young children and the insane), thinking to benefit

him by forcing a gift upon him; rather I can benefit him only in

accordance with his concepts of happiness.”31 Or, we may generate

excessive feelings of gratitude among the recipients that lower his or

her self-esteem; the benefactor

must also carefully avoid any appearance of intending to bind the

other by it; for if he showed that he wanted to put the other under an

obligation (which always humbles the other in his own eyes), it would

not be a true benefit that he rendered him Instead, he must show

that he is himself put under obligation by the other’s acceptance or

honored by it 32

We certainly can imagine cases in which an extraordinary

kind-ness done for a near stranger would make him feel uncomfortable,

or feel that he owed something in return; it is nice to buy the

hard-working janitor in your building, whom you only know by

first name, a cup of coffee or a muffin once in a while, but giving

him a new laptop would be very odd and uncomfortable, especially

for him Beneficence is ideally practiced to a degree

proportion-ate to the closeness of one’s connection to another person, and in

most market settings, the closeness is small enough to render all

but minimal pleasantries or obvious beneficent acts unnecessary

“Random acts of kindness,” as the bumper stickers implore us to

practice, are fine, but they need be done with discretion, lest they

The Case of Health Care

One of the areas of the economy in which the role of markets is

ques-tioned most often is health care The field of health care deals in

inti-mate issues of life and death, and the intense feelings and emotions

that accompany them The patient’s interests in her own health,

com-fort, financial security, as well as in the well-being of her loved ones

along these same lines—and every rational person’s interest in

auton-omous choice itself—are numerous, complex and, as with all

inter-ests, known to only the patient herself As such, the choices regarding

health care, regarding either you or a loved one, are among the most

intimately personal choices a person will make in her lifetime For

that reason, along with the reasons detailed earlier, the arguments in

support of markets are actually as strong, if not stronger, in the case

of health care than in other sectors of the economy

Of course, a free market allocates medical resources according to

the price mechanism, which may seem to some to be unfair or

arbi-trary Do not these aspects of the market violate dignity? While any

allocation of scarce but necessary resources is going to have tragic

aspects, there is no better way—ethically speaking—to allocate them

than the market The possibility of making private decisions

regard-ing the benefits and costs of various treatment options, whether for

minor illness or chronic disease, puts the choice in the patient’s hands

(as well as with her doctor and whomever else the patient wants to

join the process, such as family or friends) In consultation with those

close to her, the patient can assess the value of various treatments,

considering the merits compared not only to their costs, and the

ben-efits and costs of alternative options, but also other uses toward which

those resources can be devoted, which are all subjective valuations

Perhaps she will choose not to undergo the premium treatment, even

if she could afford it, because she wants to leave the money for her

children, or take a cruise in the final months of her life; or perhaps

she will sell her house to pay for a little more time on life support and

with her grandchildren In a market setting, this choice is hers, along

with its benefits, costs, and other consequences

I am not denying that the patient may not be able to afford the

premium treatment because she does not have the resources for it;

this is tragic, to be sure, but unavoidable in a world of scarcity If she

is not making these decisions herself, someone else is; an insurance

company, HMO, or state-operated health plan may also refuse her

the premium treatment based on costs But in these cases, the

deci-sion would be made for her, according to someone else’s calculation

of whether the treatment was “worthwhile” in terms of costs and

benefits for the doctor, hospital, insurance company, or government

health program, all of whom have scarce resources that must be

allocated somehow In a market context, the decision would be hers

within her given circumstances, even if it seemed she had no decision

at all because she does not possess the resources, either due to bad

luck or bad planning, or other choices made through her life

In such a case, all is not lost, necessarily; just because the

pre-mium treatment is out of reach does not mean there are not lesser,

more inexpensive treatments that will also be of benefit In a market

system, this is the patient’s choice, just as she can choose what size

house to buy, what model car to lease, what size TV to own Every

person prioritizes the various interests in her life; some forego a large

house to take frequent vacations, some do the opposite Some may

opt for the cheaper treatment option to retain more resources for

another goal in life, or to give more to others rather than spend it on

premium care for herself And certainly, past choices will constrain or

expand her present options; one who spends her income on lavish toys

throughout life should not expect sympathy when she cannot afford

top-line treatment at the end of it But these are her choices, while

in any other system, this decision may be made for her, according to

calculations based on the imputed value of her life and her well-being

compared to other persons Not every person can afford to have the

premium treatment, but this fact is due to scarcity of resources, not

the way in which they are allocated or distributed, and it will be true

under a state-controlled system as well as a market system A state

system focused on efficiency cannot allow everyone to have the

pre-mium treatment either, and the choice of who (if anybody) undergoes

it will be truly arbitrary, with little if any role for choice on the part

of the patient or her family Choices that so closely affect a person’s

life should be made by that person alone (or other persons to whom

she delegates—or sells—that authority); they should not be made by

another party that either presumes to know her “true interests” or

serves the collective weal in the name of efficiency

Furthermore, the market also allows health care decisions to be

made in conjunction with other lifestyle decisions If you choose

to smoke, you increase your risk of cancer, and in a market system

you would be responsible for that cost of your lifestyle decision If

you want to drink sugary sodas and juice drinks, or indulge in foods

loaded with trans fats, you also choose to incur higher risk of obesity,

diabetes, and other maladies, and in a market system you would be

responsible for those costs The current push to regulate, tax, or ban

these products is (ostensibly) motivated by lowering governmental

health care costs (if not outright paternalism) But if those costs were

the responsibility of the individual, the state would have no concern

with them Holding persons responsible for the consequences of their

behavior is also implied by respect for dignity; out of that respect, we

treat other persons like the rational, mature adults they are, which

involves imputing responsibility for the outcomes of their

autono-mous decisions.33

But what if the inability to pay for desired or necessary treatment

is due to bad luck, not bad planning or irresponsible choices? Legal

and political philosopher Ronald Dworkin, who incorporates

respon-sibility into his program for resource egalitarianism, distinguishes

between option luck, which is the result of voluntary gambles (such

as buying a lottery ticket), and brute luck, which does not result from

any voluntary choice (such as being born with a birth defect or genetic

abnormality that leads to health problems later in life).34 Option

luck—including falling ill after one has chosen not to insure against

sickness—is the agent’s responsibility completely, but brute luck is

not, and Dworkin recommends that a baseline level of catastrophic

health insurance be included in everyone’s “bundle” of resources at

birth My view on this is sympathetic but tragic: while a person is

cer-tainly not morally responsible for bad (brute) luck, neither is anyone

else, individually or collectively Someone must bear the costs (the

tragic aspect), but there must be a further argument for shifting that

burden to another party, such as the argument of fault does in

acci-dent law (if the injurer is not found negligent or at fault, the harmed

party is responsible for the costs of her injury, though she may not

be at fault either) Some condition that serves the same function as

the fault standard in accident law is necessary to justify holding the

collective responsible for the bad luck of individuals within it, but it

not clear to me how that condition can be justified in a dignity-based

system such as the one that I have described (which, of course, may be

enough to cause some to doubt the justice of the system itself)

The market not only preserves individual choice; it also

coordi-nates all the countless individual choices to allow each person to

pur-sue her goals—including those regarding health care—consistently

with all others doing the same If more people want an expensive

medical device or procedure than can be accommodated with present

resources, then the market allocates it to the ones who are willing to

sacrifice the most for it through an increase in price, which will likely

also generate more production of the scarce resource (a result that

can-not happen under a system that does can-not allow prices to respond and

adjust to market conditions) In other words, it is the circumstances

arising from the culmination of all of the individual decisions,

coor-dinated through the market, that constrain each person’s decisions,

but this is necessary to accommodate each person’s choices without

introducing bias, favoritism, or arbitrary official discretion If many

people want the same scarce medical technology or procedure, the

market solves this problem impersonally by rationing it on the basis of

price, and those who have made decisions (or have enjoyed good luck)

that resulted in sufficient resources, and choose to spend them on this

procedure, will have it The alternative to choice by the patient herself

against the background of impersonal circumstances is choice by an

external policymaker or deliberative body, in which the worth of one

person’s life, health, and dignity is traded off against those of others

according to a formula that by its very nature cannot accommodate

any of these crucially important concepts

Conclusion

I have argued that the market embodies respect for the dignity of

rational persons, insofar as those persons are allowed to make choices

in their own subjective interests, in the absence of coercion and

dig-nity, constrained only by the choices of all other persons doing the

same To the extent that this represents a principle of justice, it is (in

Robert Nozick’s terms) a historical rather than a patterned principle

of justice: it is just because of the process, not the result.35 True to

this, it was not my intention to paint a rosy picture of the outcomes of

the market process All too often, hard choices have to be made, but

those choices will have to be made in any system, whether organized

around decentralized markets or centralized control; scarcity does

not bow to government fiat But in a market system, the individual

makes those tough choices herself, within the circumstances in which

she finds herself, based on her own subjective valuations of the

innu-merable dimensions and aspects of the available alternatives, and she

is held responsible for the circumstances The market’s positive role is

to coordinate all of the individual decisions, allowing each person to

pursue and achieve her ends to the maximum degree consistent with

all others doing the same, resulting in an allocation of resources free

of any outside bias or favoritism All of these features of the market

pay due respect to the dignity and autonomy of rational persons—not

as a happy accident or contingent consequence, but as implied by the

essential nature of the market as the institutional realization of free

1 For an excellent, concise introduction to Kantian ethics, see Sullivan’s

(appropriately titled) Introduction to Kant’s Ethics.

2 For discussions of the various meanings of autonomy, see Feinberg,

Harm to Self, chapter 18; Gerald Dworkin, Theory and Practice of Autonomy; chapter 3; Hill, “Autonomy and Benevolent Lies,” 29–37;

and “Kantian Conception of Autonomy”; and Irwin, “Kantian Autonomy,” 139–40.

3 He mocks such a person as “fantastically virtuous who allows

noth-ing to be morally indifferent and strews all his steps with duties, as

with mantraps” (Metaphysics of Morals, 409).

4 Kant, Grounding, 436.

5 Ibid., 434; the persons/things distinction itself appears on 428

This is not to say, however, that persons’ services cannot be ued and assigned a price: “skill and diligence in work have a mar- ket price” (435), though the person herself does not (see also Kant,

val-Anthropology, 292, for a similar statement) See Sullivan, Immanuel Kant’s Moral Theory, 195–8, for a general discussion of the distinc-

tion between persons and things.

6 “Act in such a way that you treat humanity, whether in your own

per-son or in the perper-son of another, always at the same time as an end and

never simply as a means” (Grounding, 429), commonly known as the

Formula of Respect for the Dignity of Persons (naturally) It may seem odd not to discuss the categorical imperative in the main text of a chap- ter dealing with Kantian ethics, but for the purposes of this discussion,

it is really beside the point For more on the categorical imperative, see

Sullivan, Introduction, chapters 2–6, for a brief introduction; Sullivan, Immanuel Kant’s Moral Theory, part III, for an detailed summary; and Paton, Categorical Imperative, for an in-depth analysis.

7 Kant, Metaphysics of Morals, 434–5; emphasis in the original See also

462 for similar language.

8 For further discussion of perfect and imperfect duty, see Gregor,

Laws of Freedom, chapter 7; and Hill, “Imperfect Duty and

Supererogation.”

9 These are the Formula of Autonomy or of Universal Law—“act only

according to that maxim whereby you can at the same time will that

it should become a universal law”—and the Formula of the Law of Nature—“act as if the maxim of your action were to become through your will a universal law of nature” (both from Grounding, 421)—

which generally result in perfect and imperfect duties, respectively.

10 The kingdom of ends is the focus of the final formula of the

categori-cal imperative, the Formula of Legislation for a Moral Community,

one version of which reads, “every rational being must act as if by his maxims he were at all times a legislative member of the universal

kingdom of ends” (Grounding, 438).

11 Hill, “Kantian Conception of Autonomy,” 85.

12 Smith, Wealth of Nations, I.2.2.

13 Deirdre McCloskey would go one step further and say that the

mar-ket promotes all of the virtues, including love and hope; see her

book Bourgeois Virtues as well as her contribution (and that of Steve

Horwitz) to the present volume.

14 Kant, Grounding, 429–30 (emphasis mine); see also Korsgaard,

“Right to Lie”; and O’Neill, “Between Consenting Adults.”

15 As legal philosopher H.L.A Hart wrote in The Concept of Law, for a

society to prosper, most of its members must take an internal point

of view to the law, in which they take some sort of “ownership” of the

law, as opposed to an external point of view that views laws merely as

commands backed by threats; see also Cooter, “Intrinsic Value” for

an economic application of this concept.

16 As Adam Smith wrote in the Wealth of Nations, “every man, as long

as he does not violate the laws of justice, is left perfectly free to sue his own interest his own way” (IV.9.51); this is also the con- text in which David Gauthier refers to the market as a “morally free zone”: “in understanding the perfect market as a morally free zone

pur-we shall be led back to its underlying, antecedent morality” (Morals

by Agreement, 84–5).

17 See Metaphysics of Morals, 229–36, for Kant’s defense of limited state

coercion.

18 Besides their book, their primary academic treatment is Sunstein

and Thaler, “Libertarian Paternalism Is Not an Oxymoron” (which naturally generated a response titled “Libertarian Paternalism Is an Oxymoron,” courtesy of Gregory Mitchell).

19 See, for instance, Kahneman et al., Judgment under Uncertainty; for

a seminal application of their insights to law and economics, which

is an important precursor to Nudge, see Jolls, Sunstein, and Thaler,

“Behavioral Approach to Law and Economics.”

20 Sunstein and Thaler, “Libertarian Paternalism,” 1162.

21 Ibid., 1172–3.

22 Glaeser, “Paternalism and Psychology,” 135; see also 155–6.

23 Sunstein and Thaler, “Libertarian Paternalism,” 1172–3.

24 For more on libertarian paternalism, see White, “Behavioral Law and

Economics,” and chapter two in this book.

25 Coleman, “Grounds of Welfare,” 1542.

26 Korsgaard, Self-Constitution.

27 Camerer et al, “Regulation for Conservatives,” 1254 (emphasis mine).

28 Coleman, Practice of Principle, 28n; emphasis in the original.

29 See Sullivan, Immanuel Kant’s Moral Theory, 214–16.

30 For more on this, and the parallels with Adam Smith’s difference

in emphasis between the Wealth of Nations and the Theory of Moral Sentiments, see White, “Adam Smith and Immanuel Kant.”

31 Kant, Metaphysics of Morals, 454; emphasis in the original.

32 Ibid., 453.

33 For more, see Korsgaard, “Creating the Kingdom of Ends.”

34 Ronald Dworkin, Sovereign Virtue, especially 73–83; for a critical

perspective, see Otsuka, “Luck, Insurance, and Equality.”

35 Nozick, Anarchy, State, and Utopia, 153–60.

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Markets, Discovery, and Social Problems

John Meadowcroft

This chapter considers the ability of markets to solve social

prob-lems It will be argued that it is helpful to identify two distinct

cat-egories of social problem: universal social problems that all advanced

societies face, the most relevant of which is the necessity of efficiently

coordinating the economic actions of the millions of people dispersed

throughout such a society, and those social problems that differ by

time and place and may be described as being socially constructed

Markets can solve both these types of social problem, but allowing

markets to do so means accepting that the solutions and outcomes

that emerge may be incongruent with predetermined views of the

“correct” solutions or “right” outcomes held by policymakers

The solutions to social problems that emerge spontaneously from

market processes will be compared with the solutions deliberately

selected via political processes Here, it will be argued that the

solu-tions produced by markets are more likely to reflect individual

pref-erences and the trade-offs people are willing to make to reconcile

competing demands on the use of scarce resources, than the

exclu-sive, one-size-fits-all solutions produced by political decision-making

This chapter will also investigate the claims recently made by

schol-ars working in the field of behavioral law and economics that basic

cognitive biases often lead people to make choices contrary to their

own best interests when choosing in markets without some form of

external guidance or “nudging.” In response to this argument it will

be contended that scholars working within this research area have

not presented convincing evidence to suggest that central “nudgers”

possess the requisite knowledge needed to guide people toward

well-being-enhancing choices Indeed, given the pathologies of political